Indiana law, surplus trigger automatic refund for taxpayers
When the state closed its books on the 2012 fiscal year, Indiana had the largest budget reserves in its history. And thanks to a law enacted one year earlier, two things happened automatically: Half of the $721 million budget surplus went to shore up state pension funds, and the other half will be delivered to residents when they pay their 2012 income taxes.
The refund, allocated on a per capita basis, will result in a $111 income tax credit for single filers and $222 for joint filers, The Indianapolis Star reports.
Under a state law passed in 2011, the extra payments to the pension system and the tax refund occur for state reserves exceeding 10 percent of spending. (Under legislation passed this year, HB 1376, the automatic trigger in future years will be reserves of 12.5 percent.)
Indiana’s new approach is an alternative to the tax-and-expenditure limitations typically instituted by states — restricting yearly revenue increases or spending growth. Wisconsin, for example, has a cap on spending tied to personal income growth in the state. Michigan limits state revenues to a proportion of total personal income (9.49 percent), and in Ohio, year-over-year spending can increase by no more than 3.5 percent.